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This model is a reminder to cut your losses and focus on future opportunities rather than getting pulled down by past decisions.
Est autem etiam actio quaedam corporis, quae motus et status naturae congruentis tenet; Quae cum dixisset, finem ille. Hoc loco tenere se Triarius non potuit. Vide, ne etiam menses! nisi forte eum dicis, qui, simul atque arripuit, interficit. Expressa vero in iis aetatibus, quae iam confirmatae sunt. Videamus animi partes, quarum est conspectus illustrior;
Qui bonum omne in virtute ponit, is potest dicere perfici beatam vitam perfectione virtutis; Memini vero, inquam; Piso, familiaris noster, et alia multa et hoc loco Stoicos irridebat: Quid enim? Ne tum quidem te respicies et cogitabis sibi quemque natum esse et suis voluptatibus? Etsi ea quidem, quae adhuc dixisti, quamvis ad aetatem recte isto modo dicerentur. Sed utrum hortandus es nobis, Luci, inquit, an etiam tua sponte propensus es?
- Ask, ‘does this cost have an impact on what will happen in the future?’
Identify Sunk Co ... Lorem ipsum dolor sit amet, consectetur adipiscing elit. Superiores tres erant, quae esse possent, quarum est una sola defensa, eaque vehementer. Sed potestne rerum maior esse dissensio? Dat enim intervalla et relaxat. Sed ad bona praeterita redeamus. Ac tamen hic mallet non dolere. Quod maxime efficit Theophrasti de beata vita liber, in quo multum admodum fortunae datur. Ergo infelix una molestia, fellx rursus, cum is ipse anulus in praecordiis piscis inventus est? Nosti, credo, illud: Nemo pius est, qui pietatem-; Quod praeceptum quia maius erat, quam ut ab homine videretur, idcirco assignatum est deo. Tum Triarius: Posthac quidem, inquit, audacius. Nunc omni virtuti vitium contrario nomine opponitur. Verba tu fingas et ea dicas, quae non sentias? Tanti autem aderant vesicae et torminum morbi, ut nihil ad eorum magnitudinem posset accedere. Quae cum magnifice primo dici viderentur, considerata minus probabantur. Duo Reges: constructio interrete.
Identifying a Sunk Cost can be difficult when there is no precise way of comparing a loss to a gain. The desire to not appear wasteful also can limit your ability to base a decision on relevant costs exclusively, especially when you feel personally responsible for the investments representing sunk costs.
The Concorde Fallacy.
The Concorde Fallacy is an alternative name for the sunk cost fallacy, coming from the way the British and French governments continued to co-fund the development of the expensive Concorde supersonic aeroplane even after it became financially untenable. Their previous investment, financially and politically, was thought to determine the ongoing funding.
Eat too much?
A common example of the sunk cost fallacy is when someone buys a large meal, then overeats to ensure ‘they get their money worth’.
The sunk cost fallacy is an unconscious bias that arises from accounting and financial domains. It is an important consideration in decision making.
Use the following examples of connected and complementary models to weave the sunk cost fallacy into your broader latticework of mental models. Alternatively, discover your own connections by exploring the category list above.
Connected models:
- Cost-benefit analysis: to consider actual pros and cons of a choice
- Opportunity cost: to consider the potential loss of a future facing decision.
Complementary models:
- First principle thinking: in breaking down a situation to its basics.
- Inversion: considering the opposite, e.g. ‘how can we continue to make that loss again?’
- The Lindy effect: to challenge sunk costs and seeing past longevity as a potential positive.
- Availability heuristic: being overly impacted by immediate situations and losses.
- Lock-in effect: is there greater friction to breaking from the status quo.
Read N. Gregory Mankiw’s Principles of economics for information on various economic theories that involve the concept of sunk costs.
This brief article references some of the relevant studies arising from Behaviorual Economics and the Sunk Cost fallacy. Check this video resource for a quick overview of the sunk cost concept and how it applies to the Concorde supersonic plane case.
My Notes
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